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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 8 July 2022
BETWEEN TREVOR DANIEL CLARK
Applicant
AND NOVA MOTORS PENROSE LTD
Respondent
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Gregory, Assessor
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HEARING at Auckland on 22 February 2022 (by audio-visual link)
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APPEARANCES
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T D Clark, Applicant
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V Odintsov and E Kuklina, for the Respondent
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DATE OF DECISION 4 May 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
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REASONS
Introduction
[1] Trevor Clark purchased a 2011 Mazda Axela for $10,750 from Nova Motors Penrose Ltd on 9 July 2021. He now wants to reject the vehicle because it had pre-existing rust and came with winter (or snow) tyres, which Mr Clark considers to be unsuitable for use in New Zealand. Mr Clark also says that the vehicle’s windscreen has now cracked, which he believes was caused by the vehicle’s structural integrity being affected by the underbody corrosion.
[2] Mr Clark seeks to recover the purchase price, the cost of replacing the vehicle’s tyres and other costs he has incurred in pursuing this claim. Nova Motors Penrose says Mr Clark’s claim should be dismissed because the vehicle has been properly repaired and is in acceptable condition for its age and mileage.
Relevant background
[3] Nova Motors Penrose imported the vehicle from Japan in about April 2021. The vehicle failed initial compliance testing due to underbody rust. Mr Clark has provided correspondence with Waka Kotahi NZ Transport Agency confirming that the vehicle was marked as damaged and that specialist repair certification was required for any repairs. That rust was treated by Epsom Vehicle Repairs Ltd in June 2021. The vehicle then passed compliance testing on 30 June 2021.
[4] Mr Clark inspected the vehicle at Nova Motors Penrose’s premises on 9 July 2021 and says that he was not told about the pre-existing corrosion or the recent rust treatment. He says that he agreed to purchase the vehicle because it looked in good condition and was reassured by Nova Motors Penrose that the vehicle was in that condition.
[5] Shortly after purchase, Mr Clark noticed that the vehicle had winter tyres, which he considered to be unsafe. Mr Clark approached Nova Motors Penrose, but it refused to replace the tyres or provide any remedy to Mr Clark.
[6] On 13 July 2021, Mr Clark then took the vehicle to a local mechanic to have the gearbox serviced. He says that he was told by the mechanic that the vehicle had been treated for underbody corrosion. Mr Clark attempted to reject the vehicle, but Nova Motors Penrose did not accept that rejection.
[7] Mr Clark then had the vehicle assessed by AA Motoring. In a Vehicle Inspection report dated 16 July 2021, AA Motoring noted that there was evidence of surface corrosion around the engine bay areas on the fixings and bolts, and that treatment was recommended. Mr Clark has since provided photographs of the underside of the vehicle, which show that the vehicle has been treated for rust.
The issues
[8] The issues requiring the Tribunal’s consideration in this case are:
- (a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
- (b) Has Nova Motors Penrose engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
Issue 1: Has the vehicle been of acceptable quality?
[9] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods a guarantee that the goods are of acceptable quality. Section 2 of the CGA defines “goods” as including vehicles.
[10] The expression "acceptable quality" is defined in s 7 as follows:
7 Meaning of acceptable quality
(1) For the purposes of section 6, goods are of acceptable quality if they are as—
(a) fit for all the purposes for which goods of the type in question are commonly supplied; and
(b) acceptable in appearance and finish; and
(c) free from minor defects; and
(d) safe; and
(e) durable,—
as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—
(f) the nature of the goods:
(g) the price (where relevant):
(h) any statements made about the goods on any packaging or label on the goods:
(ha) the nature of the supplier and the context in which the supplier supplies the goods:
(i) any representation made about the goods by the supplier or the manufacturer:
(j) all other relevant circumstances of the supply of the goods.
[11] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a)-(e) of the CGA as modified by the factors set out in s 7(1)(f)-(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from Mr Clark’s subjective perspective.
The winter tyres
[12] The presence of winter tyres on this vehicle does not mean it was of unacceptable quality. The winter tyres were fit for their purpose, were not defective, would have been durable if left on the vehicle and were safe – they complied with all NZ Transport Agency and warrant of fitness requirements for safe use on New Zealand roads. Although winter tyres are not optimal for use in most New Zealand conditions, and although most consumers would prefer non-winter tyres to have been installed on the vehicle, the presence of safe winter tyres does not mean the vehicle failed to comply with the guarantee of acceptable quality.
[13] In concluding that the winter tyres did not breach the guarantee of acceptable quality because they meet warrant of fitness requirements, I note that Nova Motors Penrose has offered to replace the tyres. Mr Clark has already done so, so Nova Motors Penrose may consider compensating Mr Clark for the $400 cost he has incurred.
The underbody corrosion
The corrosion was not structural
[14] The extent of that underbody corrosion present when the vehicle was imported into New Zealand is unclear. The information from Waka Kotahi does not confirm the extent of the corrosion and Nova Motors Penrose was unable to provide any photographs of the corrosion before it had been treated.
[15] However, I find that it is likely that the underbody corrosion was surface corrosion only and did not affect the vehicle’s structural integrity. If the vehicle had significant structural corrosion, it would have been flagged as “imported as damaged” by the border inspector and that imported as damaged flag would remain with the vehicle throughout its life. Neither party produced evidence to show that the vehicle has an imported as damaged flag attached, which leads me to the conclusion that the corrosion when the vehicle was imported into New Zealand was surface corrosion only.
The corrosion has been properly treated
[16] Nova Motors Penrose provided photographs of the affected areas of the vehicle, taken after it had been repaired by Epsom Vehicle Repairs Ltd. Mr Clark has also provided photographs of the affected areas of the vehicle, taken after the hearing on 22 February 2022. Both sets of photographs show that the underbody corrosion has been properly treated and repaired.
[17] Mr Gregory, the Tribunal’s Assessor, considers that the photographs show that the application of the underseal looks to have been done to a high standard with good coverage of underseal. Mr Gregory says that, looking at the photographs supplied by Mr Clark, the worst of the corrosion now present appears to be on untreated and non-structural components such as the starter and solenoid, engine sump pan and panel bracket. Mr Gregory says that it is common for corrosion to form on these components and the vehicle’s structural integrity or durability will not be affected.
[18] Mr Gregory says that the photographs provided by Mr Clark also show that the treated areas look to be holding up well with minor surface corrosion appearing on some of the suspension components and a cross member. Mr Gregory says that it is clear that there has been corrosion on one of the exhaust hangers, but that corrosion has been treated properly and should be durable for some time. Mr Gregory considers that the treatment applied to the underside of the vehicle will significantly slow down the progression of any surface corrosion, and in his opinion, there should not be any major structural corrosion problems to the underbody of this vehicle for many years to come.
The cracked windscreen
[19] The vehicle’s windscreen is now cracked, as shown in photographs provided by Mr Clark. The cause of the cracking is unknown, although the absence of a chip in the windscreen suggests that the crack has been caused by pressure placed on the windscreen.
[20] Mr Clark believes that the pressure that caused the windscreen to crack was caused by the vehicle’s structural integrity being compromised by corrosion. Given my finding that the corrosion present when the vehicle was imported into New Zealand has not affected the vehicle’s structural integrity, I cannot be satisfied that this was the cause of the cracked windscreen. Further, given the real possibility that the cracked windscreen was caused by impact damage, or pressure being applied to the windscreen (such as someone pushing on the windscreen), which can cause precisely the type of cracking that exists, I cannot be satisfied that the cracked windscreen breaches the guarantee of acceptable quality.
The vehicle is of acceptable quality
[21] Consequently, because the winter tyres were acceptable, the underbody corrosion was not structural and has been properly repaired and the windscreen was not cracked due to any inherent defect with the vehicle, I am satisfied that the vehicle is of acceptable quality because it was as free of minor defects and will be as durable as a reasonable consumer would consider acceptable.
Issue 2: Has Nova Motors Penrose engaged in conduct that breached s 9 of the FTA?
[22] Section 9 of the FTA provides:
- Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[23] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[1]
The question to be answered in relation to s 9 ... is ... whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established.
[24] Mr Clark submitted that Nova Motors Penrose engaged in misleading conduct by describing the vehicle as a “Grade 4” import and by failing to disclose that the vehicle had pre-existing rust.
The “Grade 4” import representation
[25] Used vehicles offered for sale by auction in Japan are assessed by the auctioneer and are typically assigned a grade between 1 and 5, with Grade 1 vehicles being of the lowest quality and Grade 5 of the highest.
[26] Mr Clark says that he was told that this vehicle was a Grade 4 vehicle. He believes that this representation was misleading because the condition of the vehicle, particularly the pre-existing rust, means it was much lower quality than he would expect from a Grade 4 vehicle.
[27] The Grade 4 representation was true. Nova Motors Penrose provided a copy of the Japan Auction Sheet for the vehicle, which shows (in a box at the top right hand corner) that the vehicle has been assessed as a Grade 4 vehicle. That assessment was not performed by Nova Motors Penrose. Instead, the assessment is performed by agents employed by the Japanese auction house.
[28] Consequently, by accurately passing on information to Mr Clark about the Grade assigned to the vehicle in Japan by the auctioneer, I am not satisfied that Nova Motors Penrose has engaged in misleading conduct in breach of s 9 of the FTA.
The failure to disclose the pre-existing rust
[29] This aspect of Mr Clark’s claim requires the Tribunal to consider the extent to which non-disclosure or silence can be a breach of s 9 and, if so, whether s 9 was breached on the facts of the present case.
[30] Under the common law principle of caveat emptor (let the buyer beware), a claimant needed to show that the other party had made a positive representation before it could succeed in any claim. Silence or the failure to disclose a material fact could not give rise to a claim.[2]
[31] This principle of caveat emptor has now been displaced by the FTA. Under the FTA, silence or the failure to disclose a material fact can constitute misleading or deceptive conduct.[3] In Des Forges v Wright, Elias J (as she then was) stated:[4]
Silence may constitute misleading or deceptive conduct, but whether it does is to be objectively assessed in all the circumstances ... Conduct may be misleading or deceptive within the meaning of s 9 of the Fair Trading Act 1986 by an omission to provide information even if no obligation to provide such information exists as a matter of general law, outside the standards of conduct required by the Fair Trading Act.
[32] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[5] Under that test, silence or the failure to disclose a material fact can be misleading where, taking account of the circumstances of the particular case, a reasonable consumer would expect the information to have been disclosed.
[33] In submitting that Nova Motors Penrose was obliged to disclose the pre-existing rust, Mr Clark seems to have relied on information he found on the Citizens Advice Bureau website, which incorrectly stated that a motor vehicle trader is required to disclose all known defects with a vehicle on the Consumer Information Notice displayed on the vehicle. There is no such obligation and I note that the Citizens Advice Bureau appears have updated its website to remove reference to any such obligation.
[34] Instead, Nova Motors Penrose was only obliged to disclose that the vehicle had been treated for corrosion if that information was so material that a reasonable consumer would have expected that information to be disclosed.
[35] In this case, given my findings (as set out above) that the vehicle does not have continuing “imported as damaged” status, that the corrosion was not structural, that it has been properly repaired and that the vehicle is unlikely to have any issues caused by corrosion for many years to come, I do not consider that Nova Motors Penrose had any obligation to disclose that the vehicle had surface corrosion that had been treated.
[36] Mr Clark’s application is therefore dismissed.
DATED at AUCKLAND this 4th day of May 2022
B.R. Carter
Adjudicator
[1] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
[2] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 103,878 (HC).
[3] Des Forges v Wright [1996] 2 NZLR 758 (HC).
[4] At 764.
[5] Hieber v Barfoot & Thompson (1996) 5 NZBLC 104,179 (HC); Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833 (HC) at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC) at [21] and [32].
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2022/79.html